It will take years to measure the true impact of today's mill closures

Guest post from Joel McKay of Northern Development Initiative Trust

January 13, 2023

When writing yesterday’s post about the difficulty of trying to gauge the impact Canfor’s decision to eliminate its pulp line at one of its mill (and about 300 jobs with it), there was one person I knew I wanted to hear from. Joel McKay is CEO of Northern Development Initiative Trust, an independent, non-profit corporation established to stimulate economic growth throughout northern B.C. He is also a former journalist specializing in coverage of the natural resource sector and thus, one of the people best positioned to take a big-picture look at what this means for the future of not just Prince George, but the region as a whole. Fortunately, he is a reader of this newsletter and was willing to share his thoughts below. And, as he says, he also writes horror stories for fun in his spare time, adding “this might be one of them.”

We’ll get to Joel in a moment (and you’ll also find him on today’s episode of CBC Daybreak North), but first some of the other coverage of Wednesday’s announcement:

  • Premier David Eby is sending a crisis response team to the city to help transition impacted workers. Also of note in this sane article: Mayor Simon Yu says this is the “saddest day” he has experienced in Prince George while still expressing optimism about the city’s economic future, while the union representing impacted workers says the 300 lost jobs represent about 20 percent of Canfor’s pulp mill employees in the city overall.

  • Expanded thoughts from the union in the Prince George Citizen, My Prince George Now and this interview on CBC Radio West. The latter, in particular, is worth listening to, IMO, to get a sense of the feeling on the ground.

  • In the Citizen, Neil Godbout writes that Canfor, which has posted hundreds of millions of dollars in profits in recent quarters, needs to be held accountable for its layoffs (he includes the other business interests of Jim Pattison in that equation) while James Steidle argues the layoffs are the result of “inept, shady, unaccoutnable leadership.”

  • I spoke to and listened to interviews from many, many industry analysts, academics and forest professionals yesterday. All of them agree that while the closure of a pulp mill is sad it has also long been considerable inevitable, and the reasons for that can be traced back to the rise of the mountain pine beetle in the late 90s and early 2000s, and subsequent policy around it. Here’s a brief summary of that history.

There’s lots of other news in today’s letter, too, but let’s go to Joel first. Talk to you after the jump!

It will take years to measure the true impact of today's mill closures

The news Wednesday that Canfor intends to permanently shuts its pulp line at PG Pulp is devastating but not unexpected, resulting in 300 permanent jobs lost and (I’m estimating) some 900 indirect jobs impacted in Northern B.C.’s largest city.

Perhaps the fact that it’s happening in the north’s largest centre, and that it’s finally hitting the value-added pulp sector, will wake some folks up that we’re heading toward something ugly in Northern B.C.

But I’m not convinced, and, frankly, it’s hard to wrap your head around just what exactly is going on in Northern B.C. and what to do about it.

Since this is, quite literally, my life’s work – Andrew has invited me to take a stab at it, so here goes.

First, a reminder: this is just the latest in a series of curtailments, shutdowns, and closures in B.C’s interior forest sector – and it’s not the first pulp mill to go either (Mackenzie Pulp, Chetwynd’s Mechanical Pulp).

I’m not going to dive into why this is happening, except to say the Mountain Pine Beetle epidemic and wildfires have drastically reduced the fibre supply, and the lack of a Softwood Lumber Agreement combined with B.C. becoming a high-cost jurisdiction have conspired to result in industry consolidation.

It needs to be said that, to some extent, it was inevitable, and no amount of policy was going to change this – there aren’t enough trees, and it takes 60 years to grow harvestable logs in Northern B.C.

The shutdown in Prince George is a reminder of the old saying “as goes the north, so goes Prince George.”

Some folks may fancy this city the “Northern Capital,” but the reality is it is the product of a regional economy.

Prince George is the service and supply centre for a region the size of France with a population of approximately 332,000 — we have a Costco not because Prince George’s 75,000 people can support it, but because Northern B.C.’s 332,000 can.

We have a university not of Prince George but of Northern B.C.

We have a Northern Health Authority, and, for my part, we have a northern economic trust.

Even our college is regional, and many of our service and supply businesses serve a region much larger than Prince George.

Heck, it’s Daybreak North not Daybreak Prince George.

Past mayors of Prince George understood well that if the rest of the region was going gangbusters, so too was Prince George.

Canfor’s decision to permanently shut a pulp line in Prince George is an indication that things aren’t all that rosy in the hinterland and we’re going to start to feel it here at home.

But here now is where things get messy, and a bit mixed up — we won’t feel the shutdown like we would’ve in the 1980s, at least not yet.

Prince George is now, really, a government town with a robust private sector. Its primary employment sectors are healthcare and education.

The region is also home to approximately $60 billion in major projects that are keeping a lot of folks very busy.

Whether you’re in favour of or opposed to LNG Canada, Coastal GasLink, Site C and TMX, is beside the point. Without these projects the region, and possibly the province, would be in dire economic straits.

The problem is these projects will be done construction in the middle of the decade and it’s unclear what’s coming in behind them to keep the region humming.

By that time, the forestry sector will be smaller than it is today.

Without new construction activity, or if we hit a slide in commodity prices, which we always do, we will really start to feel the impact here in Prince George.

Suddenly, those families from Kitimat and Terrace that make their bi-weekly or monthly trip to Costco won’t be anymore.

Hotels won’t be as busy, nor restaurants.

Contractors will slow.

If you think that Prince George’s reliance on public sector jobs will save us, well, for a time it might but not forever.

Remember that public sector funding and service delivery is tied to demand, demand indicated by a population that’s growing, a population that’s growing because of private sector growth.

Even prior to the forest sector downturn, Northern B.C.’s population wasn’t growing all that much.

In fact, between the 2016 and 2021 census periods, Northern B.C. was the only region in B.C. that didn’t see significant population growth.

And it can already be tracked through regional elementary and high school enrolment numbers, and post-secondary enrolment trends throughout the region.

There’s a reason some post secondary institutions have become overly reliant on international students — the domestic enrolment numbers simply aren’t there to support the institution’s existing size.

So, does Canfor’s PG Pulp shutdown make it inevitable that this will all come to pass?

No, as Andrew rightly pointed out, it’s a flesh wound to the regional economy.

But it’s not the first flesh wound, nor will it be the last.

Eventually, you get one too many flesh wounds and well… you know what I’m saying.

How do we turn this around?

Well, that’s not rocket science either.

You must create the conditions for private sector success, that means Northern B.C. must maintain a jurisdictional competitiveness and advantage to attract and retain investment and job growth.

It means we need to find ways to get to “yes” on new opportunities while keeping our values intact.

And it means we need to reap the benefits of our primary sectors and reinvest those benefits directly back into the communities from which they were generated to address social challenges and areas of market failure.

And, yes, we need to diversify our private sector economy to smooth out future bumps in primary sectors.

The longer we wait to have a deliberate strategy for intervention the harder it will be to address these challenges.

Whether intentional or not, Canfor’s decision to announce the shutdown just days before the BC Natural Resources Forum is a clear message.

Now is the time for Prince George to do what’s it’s done so successfully in the past — whether it was getting 16,000 donations to create UNBC or assembling 7,000 people to rally for healthcare — lead.

Joel McKay is CEO of Northern Development, Northern’s B.C.’s regional economic trust. He is also a former journalist specializing in coverage of the natural resource sector. Oh, and he writes horror stories for fun in his spare time. This might be one of them.

Friday news roundup

Plenty more news to take us into the weekend:

Letters to the editor

In response to Tuesday’s post in which I posited that Prince George doesn’t really have a good city to compare itself to, Canuckoduff comments:

I vote for Kamloops as rival/analogue/conversant: similar population and geography (meeting of rivers & highways & railways), both former HBC posts, both with at least one pulp mill and provincial prison, similar downtown issues, and both regional centres for large rural areas. TRU seems kind of like CNC and UNBC combined, as if PG had levelled-up the college instead of developing a separate university.

Love the 1966 highway video. But it also caused a small amount of rage when I watched the stretch between Quesnel and PG. It's been nearly 60 years and the highway remains largely unchanged. If we were transported back in time to 1966 and started driving that highway, how long would it be before we noticed we weren't in 2022? Probably a good distance. Yikes.

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And finally… there is apparently a really well-fed beaver down at Cottonwood Island Park. These photos are from December but I’ve seen other people post about it as recently as yesterday.

Alright, that’s it for this week. Talk to you Monday.

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